Financial performance incentives for regulated utilities, part of the discussion about ratemaking reform since the 1970s, have enjoyed renewed interest in the past decade. But a review of states’ recent experience with performance incentives suggests that the results have been mixed or inconclusive. A new RAP paper explores the policy, legal and financial aspects of performance incentive mechanisms and asks how regulators can make these incentives – whether rewards or penalties – more effective.

In a webinar discussion, co-authors Mark LeBel and Steve Kihm, along with RAP President and CEO Richard Sedano, took a closer look at recent practices underlying cost-of-service ratemaking and the utility business model – and examined whether some of those practices need to be re-examined to incentivize performance. U.S. Program Director Damali Harding moderated the discussion.